ValueBuddies.com : Value Investing Forum - Singapore, Hong Kong, U.S.

i only can say something to make you feel better.
All of us here or most of us here will have or have something like or similar to your situation as we travel in our investment journey.
i have many times faced the same situation like you face now. There is no "sure or easy" answer to your situation. Sometimes i came out alright, sometimes i never see the light again. It is never correct for us to tell you exactly what you must do. You must weigh all your options carefully according to what you think the end result will be for each option. And which option is most suitable to your financial capability now or financial situation.
Even then there is no sure result even for the option you choose.
My 2 cents.

(02-05-2013, 06:10 PM)pubster Wrote: [ -> ]As such, I have hope to rethink the current situation more seriously. Currently I am comtemplating on the actions (or non-actions).
1) Continued to hold and just hope for some events (fare increase? other sources of revenues?) to increase its share price again?
2) Average down another 15-20k when the price seems to reach its bottom?
3) Sell off and registered the loss (around 6K, 20%)

For 1), the dividends is paying lesser than CPF so basically the cost of holding is increasing as time goes by. Of course, dividends might go up in the future...
For 2), the above reason to preventing me from averaging down, unless the price dropped to $1 which means the yield will be 2.5% which is the same as CPF... provided the dividend don't drop also in the future...
For 3), it is painful but if that must be done to stem further loss... I shall do it.

My assessment of whether to get rid of any particular stock is always based on a relative comparison with the other listed stocks in the market.
If there are other listed stocks that match your requirements more than SMRT, then there is a case to take action. Whether you should take action a not will depend on your own analysis.

The process of switching should be continuous throughout the year based on the financial statements or extraordinary events.
The purchased price of your current holding should not be taken into consideration since it was already a past event. The more important task is always to guesstimate the probability that you can get a reasonable return based on the current price, estimated future EPS and any other events that you are anticipating.

In the case of CPF, 2.5% return in OA is also one target of comparison.

(02-05-2013, 06:10 PM)pubster Wrote: [ -> ]As such, I have hope to rethink the current situation more seriously. Currently I am comtemplating on the actions (or non-actions).
1) Continued to hold and just hope for some events (fare increase? other sources of revenues?) to increase its share price again?
2) Average down another 15-20k when the price seems to reach its bottom?
3) Sell off and registered the loss (around 6K, 20%)


For 1), the dividends is paying lesser than CPF so basically the cost of holding is increasing as time goes by. Of course, dividends might go up in the future...
For 2), the above reason to preventing me from averaging down, unless the price dropped to $1 which means the yield will be 2.5% which is the same as CPF... provided the dividend don't drop also in the future...
For 3), it is painful but if that must be done to stem further loss... I shall do it.

At a crossroad now... Hoping to hear some advices from the more experienced people here before making a decision...

I have learnt a lot by reading the kind contributions made in the forum. I hoped sometime in the future, I will be knowledgeable enough to contribute back to this forum. Thank you very much in advance for you kind advices.

Sorry to hear about your predicament.
The forward looking guidance by SMRT new CEO was not bright either, citing cost increases in staffs as well as maintainence costs.

The maintainence costs for operating the trains are large and obviously, someone somewhere must have been cost-cutting it to a bare minimum thus constant disruptions erupted.
We can expect more to come yet as not all issues are solved. Furthermore, the government seems intend to start introducing more competition into the public transport sector.
A duo-monopoly might become a monopolistic competitive sector.

Having said that, there is another strategy known as hedging, which I believe some forumers have discussed before.
By buying shorts on SMRT, you would be able to minimise your losses to a lesser extent. This can be done through CFD platforms.
However bear in mind that the following costs exist.
1. Financing costs
2. Dividends repayment costs ie. you pay out dividends from your shorts counter.

Also to bear in mind that whatever upward ticks in SMRT, you would incur losses on your shorts instead.
Thus, you might consider adjust ing your ratio proportion 60 (shorts):40 (longs) or 50:50.

Bearing in mind even 50:50 would incur you losses through the financing costs and dividend repayments as per mentioned above.
Not to mention the capital you invest into the shorts.

Ultimately, this is a hedging strategy and there will still be losses unless you double down on the right trend of SMRT for the next one year.

And finding the right ratio is also critical. But a 60:40 ratio would help in losses minimisation from my experience.

Hope this would trigger your thinking and perhaps help to minimise your losses onwards.

If losing X causes you too much psychological stress, then stop-loss before X and move on. There's always another battle to be fought. What's important is to size your bets so that no one bet wipes you out (capital-wise and psychologically) and makes it impossible to come back.

Personally, i do not know how to value SMRT when it is in the midst of all these regulatory changes - the old SMRT is history and i have no idea what the new one looks like. Is the bus section going to be spun-off? Is a third player e.g. NTUC joining the party? Unless you are able to foresee what Lui Tuck Yew+LTA are going to do, predict the revenue+cost structure, determine the cashflow stream and hence the fair value, i will advise against a method of "doubling up at Y".

I agree with yeokiwi : "Whether to get rid of any particular stock is always based on a relative comparison with the other listed stocks in the market. If there are other listed stocks that match your requirements more than SMRT, then there is a case to take action. Whether you should take action a not will depend on your own analysis."

For the analysis, as what many other forumers have input, the near future of SMRT is not rosy. My personal estimation is that SMRT will declare a total annual dividend of around 2.5-4 cents for the next few years. That is barring any unforseen circumstances.

Lastly, if the losses at SMRT are giving you sleepless nights, then sell them. Otherwise you may consider maintaining your holdings or trimming it down if there are relatively better stocks out there in the SG market.

IMHO.....

- The price will continue to drop
- There might be further dividend cuts next year (if losses persist quarter after quarter)
- The coming fare hike (if any) will not be huge bcos they dun wanna anger the public

Based on the above 3 points, I think SMRT does not meet your investment objective anymore. Whether to sell or not, final decision is yours.

Let me share my experience. I used to have FSL bcos of the 11% yield. Then, it slashed dividends deeply. I cut loss immediately and re-invest my funds elsewhere. Soon after, they stopped dividends totally.

If I am in your situation, I will cut loss and move on. Reason is simple: It no longer meet the objective of investing in it at 1st place.

In my short 6yrs of investing, I had learnt to cut loss and move the funds to something else that has a higher probability to go up, or better dividend. Even when the price of a share that I am holding is going too high for my comfort, I will also sell off and move on. If there nothing to buy, I will hold cash until I find something for myself. After the sale, whether it goes up from there, or go down, it no longer my concern. So far, this "trick" had been working. Until a point in time when this no longer work, then I will have to think of another "strategy"...

The management is directionless , sensitive to increase fare but costs are piling up especially with the old lines.

(02-05-2013, 06:10 PM)pubster Wrote: [ -> ]Seeking for some advices here.

As mentioned previously, I have 15 lots @1.88 using my CPF funds. Although the price drop quite badly and hovering around the 1.6 region since last year, I am able to justify holding the shares as at least the dividend is paying me more than what CPF is paying me @2.5%. I can continue holding as the cost price will get cheaper over time and hopefully, the price can slowly crawl its way up to the breakeven point.

With the drastic cut of the dividend, the reason do not hold anymore. I cannot even justify additional purchase to average down as the dividend pay much lesser than what CPF is paying me. Of course unless I am hoping for capital gain... But that is not my purpose when I purchased using my CPF. I'm looking for something that is safe and also pays better than CPF.

I know my choice of choosing SMRT might not be correct as a safe yield stock. The increased in ridership/train revenues, rental over the past years made me believed it was safe... But I also know the due diligence I did for this purchase is very lacking.

As such, I have hope to rethink the current situation more seriously. Currently I am comtemplating on the actions (or non-actions).
1) Continued to hold and just hope for some events (fare increase? other sources of revenues?) to increase its share price again?
2) Average down another 15-20k when the price seems to reach its bottom?
3) Sell off and registered the loss (around 6K, 20%)


For 1), the dividends is paying lesser than CPF so basically the cost of holding is increasing as time goes by. Of course, dividends might go up in the future...
For 2), the above reason to preventing me from averaging down, unless the price dropped to $1 which means the yield will be 2.5% which is the same as CPF... provided the dividend don't drop also in the future...
For 3), it is painful but if that must be done to stem further loss... I shall do it.

At a crossroad now... Hoping to hear some advices from the more experienced people here before making a decision...

I have learnt a lot by reading the kind contributions made in the forum. I hoped sometime in the future, I will be knowledgeable enough to contribute back to this forum. Thank you very much in advance for you kind advices.

Hi Pubster,

I guess you could reevaluate your investment strategy. Something you could think about is the investment horizon. If your investment horizon is within the next 5 years, it would be unlikely that SMRT could recover to its original level of dividend and selling and move on to another investment might be a better choice.

But if you have a longer investment horizon, you can see that SMRT would still be a very resilient business. Given the rental and advertising business alone, it would still generate very good cash flow.

A good maintenance and system upgrade program would also improve the current situation. I would think that if the maintenance and engineering is overhauled, the new trains and upgraded rail system would perform more reliably in the near future. SMRT is now reactive to defects in the rail system and a better framework of prognostic, by detecting defects before it occurs and "lifed" critical components which could not be inspected during daily servicing, would dramatically improve reliability and improve the lives of our fellow transport users. It should be achievable but takes time.

(02-05-2013, 10:22 PM)NTL Wrote: [ -> ]If I am in your situation, I will cut loss and move on. Reason is simple: It no longer meet the objective of investing in it at 1st place.

In my short 6yrs of investing, I had learnt to cut loss and move the funds to something else that has a higher probability to go up, or better dividend. Even when the price of a share that I am holding is going too high for my comfort, I will also sell off and move on. If there nothing to buy, I will hold cash until I find something for myself. After the sale, whether it goes up from there, or go down, it no longer my concern. So far, this "trick" had been working. Until a point in time when this no longer work, then I will have to think of another "strategy"...

Congratulations!
i know of a stock remisier who favours your practice. She calls it like the art of "Bonsai Pruning". It's really not easy to cut loss and move on due to our psychology of afraid to admit we are wrong. i am guilty too. i am a little "better" at taking profit only and collect all the rubbish.

That's why once you are in the stock markets for some years, it's very hard for most of us to sell everything and start from scratch again. Start a brand new portfolio that is. Anyone has done it?